Exception handling in Java is a crucial programming concept that allows developers to manage errors and unexpected events during the execution of a program. It provides a structured mechanism to catch and handle exceptions, which are disruptions in the normal flow of the program. By using constructs like try-catch blocks, developers can prevent abrupt program termination and ensure that applications run smoothly, even when errors occur. This not only enhances the user experience by providing meaningful error messages but also improves code readability and maintainability, making it easier to identify and resolve issues in the codebase.